Buying an Income Annuity is Easy and Can Lock-in Retirement Income
How can you use an annuity to close the retirement income gap but at a price you can afford? In this video, I’ll walk you through step-by-step to getting an income annuity on as little as $25 a month.
Closing the Retirement Income Gap
Nation, we’ve been talking about the retirement crisis lately. We looked at how social security is just not enough and I showed you five ways to close that income gap last week.
Also last week, we talked about an income annuity, the pros and cons, and how you can guarantee income in retirement. And with more than half of American households with no retirement savings at all, I want to come back to the topic and show you how to buy an income annuity.
With that average social security check under fifteen-hundred after taxes, you need another income stream. You cannot rely only on SSI and an annuity could be your best opportunity to close that gap for yourself or help pay costs of supporting a parent.
That’s why I wanted to put this series together and I want to thank AgeUp for sponsoring it. Ageup is an income annuity backed by Mass Mutual that provides supplemental income for yourself or your parents at a certain age. You contribute as little as $25 a month and get guaranteed income after you or your loved one reaches 91 years old and can even get your contributions back on an optional death benefit.
See how much retirement income you can guarantee with AgeUp
What is an Income Annuity?
We’ll do a quick review of how an annuity can guarantee an income in retirement and how much the average annuity costs. Then I’ll take you through step-by-step to estimating how much income you can guarantee through AgeUp.
An annuity is a guaranteed income investment, usually sold by an insurance company, that pays out a fixed payment. You can fund an annuity, so buying the investment, with a one-time payment or through regular payments.
Some annuities are immediate, so you buy into it with a one-time payment and immediately start getting that set income paid out each month. Other annuities are deferred, which just means payments are set to start sometime in the future.
We covered the pros and cons of an annuity in that video last week but one of the biggest drawbacks is just how expensive these things can be. In fact, the Life Insurance Marketing and Research Association reports the minimum upfront cost for a longevity annuity at $10,000 and average contributions over $181,000. And Annuity.org reports that agent commissions alone can be up to 10% of the total value of your contract.
How to Buy an Income Annuity for Retirement
This is why I like AgeUp here for a twist on that traditional annuity idea. At those costs, most people would never be able to afford an annuity. Being able to guarantee that income in retirement would just be out of the question.
AgeUp differs though in two very important ways.
First, by deferring the income longer, the cost of that annuity goes down. I’ll walk you through an example later, but the platform estimated that I could lock in a guaranteed income of $818 a month when I turn 91 with payments of just $25 a month from age 53.
Besides the lower cost, AgeUp is unique in that you can also guarantee that income to cover expenses caring for a loved one. You can get an annuity on a parent, grandparent, any older relative and lock-in that income if they reach a certain age.
The Urban Institute at the U.S. Department of Health estimates that a parent with serious long-term care needs means upwards of $140,000 in out-of-pocket costs costs. And the social security administration estimates that one-in-three 65-year olds will live to ninety or older, so this type of caregiver income is becoming hugely important.
Getting an estimate on an annuity from AgeUp takes less than a few seconds. You can guarantee income for when you get older or for those expenses when a loved one does. All this is backed by MassMutual with over 160 years in insurance and an A++ rating by A.M. Best.
If I click through, I can get an annuity for parents, grandparents, in-laws and even aunts and uncles. I put in their current age, anyone age 50 to 75 can qualify, and then how much I want to contribute to the annuity each month.
Again, the advantage here is that AgeUp is affordable for anyone. You can contribute as little as $25 a month and the estimator will tell you how much guaranteed income you can secure. For even more certainty, they also give you the option to have 100% of your contributions returned to you if the annuity doesn’t get paid out because of death.
You can start collecting income from the annuity at anytime after that person reaches 91 years so this is going to kick in when you need it most. I’ll click no on the optional death benefit and this says I can guarantee $322 a month starting at my mother’s 91st birthday for just $25 a month.
Signing up can be done completely online. You’ll just enter some basic information about you and your loved one if you’re getting an annuity on someone else. You’ll confirm your identity through your social security, link up your bank account for payment and digitally sign the contract.
You get a 10-day free look period after each month’s contribution to cancel and you can change the amount you contribute at any time. AgeUp offers that death-benefit option to get all your contributions refunded if the annuity doesn’t pay out and it also comes with a cash refund guarantee. Once the person covered by that annuity reaches the payout age, you’re guaranteed to get back at least what you paid in, regardless of whether you chose the death-benefit option or now.
Use this calculator to see how much retirement income you can guarantee with AgeUp
Securing an income in retirement doesn't have to be just for the rich or those few left with a pension. Social Security isn't going to cut it but you can buy an income annuity for as little as $25 a month and lock-in money for retirement. Check out the free calculator on AgeUp to see how much income you can produce with an annuity.
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.